Construction projects are fraught with risk and there are several different insurance products available to cover these exposures. Among the most common policies are the builder’s risk insurance and general civil liability. Many people wonder if they can cut costs by buying just one. Is coverage redundant? do you really need both?
While there is some overlap between the two types of policies, both are often necessary to cover all potential exposures. the two are not interchangeable; each performs a specific job.
As previously mentioned in a blog post, builder’s risk insurance is a specialized type of property insurance that protects buildings under construction. Unlike homeowners insurance, which covers structures that have already been built, the builder’s risk is for new construction, renovations, or additions. A property in the midst of construction has different risks than an established structure, and builder risk is essential to managing these unique risks.
Builder’s risk insurance covers a variety of situations, including fire, wind, lightning, vandalism, explosions, and theft. Basic builder’s risk insurance policies help protect both the building under construction and the materials, accessories and equipment that will be used in the construction. however, builder’s risk insurance does not typically cover employee theft or bodily injury, only external events.
general liability of contractors
Contractors general liability, on the other hand, covers third-party property damage, advertising injury, and bodily injury, incidents that can occur during normal business operations caused by a contractor and its employees. it does not cover employee injuries or damage to a contractor’s tools or property. contractors are also legally required to have this coverage in many states.
what’s the difference?
One of the main differences between the two coverages is who buys the insurance. Generally, the person or company that purchases builder’s risk insurance is in charge of the project and responsible for the structure until it is sold, while general liability insurance is purchased by individual contractors. your insured could be a contractor in charge of a structure and would need both coverages. anyone else working on the job, such as a plumber or painter, would only need general liability.
Another way the two coverages differ is the term of the policy. builder’s risk is only acquired while the building is under construction, but contractors must carry general liability insurance throughout the year (or while operating a construction business).
Ultimately, the key distinction between builder’s risk and general liability is that one protects the jobsite from damage and the other protects individual contractors. If you’re an insured and wondering what coverages you need, ask your insurance agent. And if you’re an insurance agent, make sure your clients get the best deals and the right coverage with distinguished.
about distinguished programs
distinguished programs is a leading national insurance program manager providing specialized insurance programs to brokers and agents with specific experience in real estate, community associations, hotels and restaurants. Property & Liability products are distributed through a nationwide network of agents and brokers. Serving the same core markets and partnering with the most stable and reputable carriers, Distinguished Programs’ General High-Limit Programs remain the clear choice in their specialty areas for superior coverage, competitive pricing and attentive service. Through thoughtful innovation, dating back to 1995, distinguished programs foster growth and opportunity for its brokers, carriers, and employees.
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